The Cincinnati Insurance Companies’ property and casualty (P/C) division expects preliminary estimated catastrophe losses of up to $85 million for the fourth-quarter of 2016, according to a recent company announcement.
Pre-tax catastrophe losses for the U.S. domiciled carrier, during the fourth-quarter of 2016, are expected to total between $75 million and $85 million. Which the company says will impact the firm’s Q4 2016 combined ratio by roughly 6.5 to 7.5 percentage points, “based on estimated property casualty earned premiums.”
Highlighting just how impactful catastrophe losses are expected to be for Cincinnati in the fourth-quarter, the insurer reveals that its 10-year historical average contribution of cat losses to the combined ratio during Q4, is 0.7 percentage points. So an impact on the combined ratio of as much as 7.5 percentage points really is a dramatic increase.
Primarily, the losses were attributable to hurricane Matthew and wildfire/wind related damages in Gatlinburg, Tennessee. The firm states that management estimates that the firm’s share of the Tennessee loss will amount to approximately $55 million, with half impacting its commercial lines results and the other half its personal lines insurance results.
For its P/C unit in Q4 the company expects its combined ratio will be in the range of 96% to 98%, which includes the effects of cat losses.
“Its fourth-quarter combined ratio before catastrophe loss effects is estimated to be approximately 3 percentage points higher than the result for the first nine months of 2016, largely due to less favorable reserve development on prior accident years,” explained the firm.
So, absent the impact of increased catastrophe losses the company’s combined ratio suffered in 2016 from adverse reserve developments, underlining the continued, challenging operating landscape insurers and reinsurers are faced with, even before heightened catastrophe losses.
“Our hearts go out to those who had their lives turned upside down from these events. Our claims professionals quickly sprang into action, inspecting losses and issuing payments so that policyholders in these communities could start the process of rebuilding.
“The financial strength of Cincinnati Insurance continues to benefit our independent agents and policyholders, giving us ample capacity to absorb insured losses, while providing the highest quality service for claims involving storms or other insured loss events,” said Steven J. Johnston, the carriers President and Chief Executive Officer (CEO).
It’s also worth mentioning the firm’s in-force catastrophe bond transaction, a $100 million Skyline Re Ltd. (Series 2014-1) issuance. Despite losses being increased for the carrier it seems unlikely that its Q4 catastrophe losses will trigger the bonds indemnity trigger for its aggregate severe thunderstorm protection, with the trigger sitting at $160 million.